TaxTMI 
TaxTMI 
2013 (8) TMI 587
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....y registered under the provisions of Companies Act, 1956 and is engaged in the business of manufacturing PY seals for dry batteries and torch lights. The assessee is manufacturing torch lights for M/s. Nippo Batteris Co. Ltd. The assessee is having two units one at Chennai and another at Dehradun (Uttarakhand). The Dehrarun unit of the assessee is entitled for exemption u/s. 80IC of the Income Tax Act, 1961 (herein after referred to as 'the Act'). The assessee filed its return of income for the AYs 2007-08, 2008-09 and 2009-10 claiming deduction u/s. 80IC for the goods manufactured at Dehrarun unit. The Assessing Officer after examining the records concluded that the assessee is not entitled to claim deduction u/s. 80IC as, in the first instance, the assessee is not carrying out any manufacturing activity; and secondly, even if the activity carried on by the assessee is held to be 'Manufacturing', the same is not done in Dehrarun. Aggrieved against the assessment order, the assessee filed appeals before the CIT(Appeals), Chennai for all the three afore mentioned AYs. The CIT(Appeals) vide order dated 16-03-2012 for the AY. 2007-08, order dated 22-03-2012 for the AY. 2008-09 and or....
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....h disparity in the quantum of sales and power consumption and repairs and maintenance, even the value of Machinery installed at Dehradun unit is far less than the Machinery and Moulds at Chennai. The assessee has not been able to explain as to how with higher salaries, power consumption and Machinery, the Chennai unit is having less volume of sales, whereas Dehradun unit has been able to record more than seven times sales with less salaries and wages, repairs and maintenance, power consumption and less value of Machinery and Moulds. These all facts clearly show that the assessee is transferring finished goods from Chennai to Dehradun only to claim deduction under the provisions of Section 80IC. The ld. DR vehemently prayed for setting aside the impugned order of CIT(Appeals). 5. On the other hand, Shri R. Badhreenath, appearing on behalf of the assessee submitted that the term 'Manufacture' has been defined in Section 2(29BA) of the Act. The activity being carried out by the assessee very much falls within the definition of manufacture as defined under the Act. The ld. AR strongly supporting the order of the CIT(Appeals) submitted that, at Chennai unit only dry cells are made for ....
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....ty is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of pro- cessing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place." The Hon'ble Supreme Court of India has in several judgments; viz India Cine Agencies V. CIT reported as 308 ITR 98(SC); Kores India Ltd., V. CCE, 2005 (1) SCC 385; CIT V. Oracle Software India Ltd., reported as 320 ITR 546 has explained the term 'Manufacture'. In the present case, the assessee is assembling various components to make a product known as 'Torch Light'. The process of assembling has been detailed in the assessment order as well as the impugned order of the CIT(Appeals). The same is re-produced herein below: a. There are three process lines. In the First Process Line, following activities are undertaken: i. Plastic Barrel of Torch is ....
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....process, we are of the opinion that the process being carried out by the assessee in assembling of 'Torch Light' amounts to manufacturing activity. A new and distinct product comes into existence after integration of various small components into one product having distinct name, character and use. Thus, we hold that the assessee is carrying out manufacturing activity. 7. The second issue which arises for determination is; Whether the assessee is carrying on substantial manufacturing activity at Chennai or Dehradun unit? The Assessing Officer has given break up of expenses incurred and sale made from Chennai unit as well as Dehradun unit. The same is re-produced herein below: Chennai Unit (Non-80IC Unit) Dehradun Unit (80IC Unit) Sales 1,03,66,381 7,42,43,567 Labour receipts 82,77,358 -- Other receipts 3,21,075 18,295 Expenses Cost of production 1,12,64,953 5,22,79,354 Selling & Distribution overheads 11,50,180 70,03,506 Admn overheads 19,19,682 39,24,080 Salaries & Wages 63,59,850 30,01,950 Repairs & Maintenance 18,66,797 3,419 Power consumption 29,13,563 6,432 Finance charges 3,90,524 8,538 Directors remuneration 12,00,0....